What is CTOS and how it affects a home loan approval?

For most people, one of the first steps of owning a home is to apply for a loan. To increase your chances of approval, the wise thing to do is to get a CTOS report and make yourself familiar with your credit score.

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1. What is CTOS?

The  CTOS Data Systems Sdn Bhd (CTOS) is one of Malaysia’s leading Credit Reporting Agency (CRA). It is a privately owned agency that archives an individual or a company’s entire credit history. Unlike the 12 months duration of a CCRIS report, the CTOS report longevity is indefinite. The report is used by banks and financial institutions in Malaysia to assess an individual or a company’s creditworthiness and repayment capabilities.

    2. What is a credit score and how it affects a  home loan application?

    A credit score indicates a consumer’s credit risk. The score ranges from 300 to 850. The higher the score, the lower the credit risk. Having a good credit score can be very beneficial for you, as most banks and credit providers would view you as a prime customer. A good credit score can increase your chances of getting a loan, get you better interest rates and speedier loan approval, among other things.

    Not just that, it is also important to remember that the negative items and negative financial history in your credit report will tremendously affect your credit score. Banks and financial institutions can be uncompromising if you have a habit of late or inconsistent repayments.

    It gives the impression that you are not being responsible for your financial commitments. Being consistent in your monthly repayment keeps your credit score green. So, make sure to make all your payments before the deadlines.

    READ: Why are these Malaysian buyers struggling to get a home loan?

    3. What are the main credit reports in Malaysia and how do they differ?

    In Malaysia, these financial institutions may use their internal methods of evaluating your credit score. However, to assist them in this evaluation, many will refer to two popular credit reports.

    • Central Credit Reference Information System (CCRIS)

    CCRIS is managed by the Credit Bureau of Bank Negara Malaysia (BNM). It gathers credit information from multiple financial service providers in Malaysia. These include banks, insurance brokers, and even private companies providing utility services such as the Malaysian telecommunication companies.

    • CTOS

    CTOS is a private agency that provides credit reporting. A CTOS score is calculated based on credit information from both CCRIS and CTOS’s database. It ranges from 300 to 850.

    4. What are the benefits of knowing your credit score?

    It is always good for you to know your credit score even though you are not buying properties. There are several benefits of knowing your score:

    • Your credit score will give you a good idea of how lenders, banks and financial institutions view you. It indicates whether you are higher or lower risk borrower.
    • Checking your credit score will alert you if lenders have listed a late payment on existing facilities in error, or if you forgot to make a payment. It will alert you to that and allow you to rectify it early.
    • Regular score checks can also be a good fraud prevention tool as any unexpected changes in your credit score can be investigated to see if any unauthorised credit facilities have been applied for or taken out in your name.

    5. How do I get my CTOS report? 

    There are three types of CTOS report for you to choose from – MyCTOS Basic Report, MyCTOS Score Report and CTOS SecureID. The basic report is free while MyCTOS Score Report and CTOS Secure ID are RM 25/ report and RM 99/ year (exclusive of Service Tax) respectively.

    Also, here are the three methods to do CTOS self-check:

    1. Online registration at www.ctoscredit.com.my
    2. Download the CTOS Mobile App
    3. Walk into any of seven CTOS Service Centres nationwide – Kuala Lumpur (Bangsar South), Klang, Penang, Johor Bahru, Kuantan, Kuching and Kota Kinabalu

    For the basic report, all you need to do is to sign up for  CTOS ID account. It will provide an overview of your credit score.

    6. What information is in a CTOS report?

    A CTOS report will include the following, depending on which CTOS report you to sign up to.

    • CTOS Score

    A rating of creditworthiness and it is indefinite, unlike the 12 months duration of a CCRIS report

    • Personal Information

    Data from the National Registration Department (NRD).

    • CCRIS

    Data from Bank Negara Malaysia (BNM).

    • Dishonoured Cheques

    Data from Bank Negara Malaysia (BNM).

    • PTPTN loan

    It is included in CCRIS report from Bank Negara Malaysia (BNM).

    • Directorship & Business Interest

    Data from the Companies Commission of Malaysia (SSM).

    • Litigation and Bankruptcy

    From the Malaysia Department of Insolvency (MDI), courts, government gazettes.

    • Trade Referee Listings

    From subscribers/creditors (example: utility companies, telco, Astro, etc.)

    7. Where does CTOS get information from?

    CTOS collects information from various public sources that include:

    • CCRIS, Bank Negara Malaysia (BNM)
    • National Registration Department (NRD)
    • Companies Commission of Malaysia (CCM)
    • Registrar of Societies
    • Publications of legal proceedings and notices in newspapers and government gazettes
    • Malaysia Insolvency Department (MDI)
    • Subscribers’ contributions to trade references (eTR)

    8. What are the factors that make up a CTOS score?

    • Payment History (45%)

    This is whether you pay your loans on time or have missed payments in the past. Being late for repayments can critically affect your credit score.

    • Amount Owed (20%)

    This is your credit utilisation. How much credit you are using compared to your available limit.

    • Credit History Length (7%)

    The period you have held a credit facility.

    • Credit Mix (14%)

    The type of loans that you have, such as housing loan, car loan, credit card, personal loan, etc.

    • New Credit (14%)

    If you have you been approved for new credit facilities recently.

    READ: Who do we blame when our home loan gets rejected?

    9. What is a good credit score range?

    The general guideline is that a ‘good’ CTOS Score will fall in the range of 697 to 850. This, however, is not a hard and fast rule and does not necessarily mean a lower score is a ‘bad’ score. When banks, lenders or financial institutions evaluate your application for loans or new credit, they may consider other factors besides your credit score.

    The chart below explains what a CTOS score means to lender.

    Source: CTOS score. © iProperty.com.my

    10. Can I dispute the information in a CTOS report?

    Yes, you can dispute the information in a CTOS report. Your data is your responsibility. You must check and ensure that all information in your credit report is correct and up to date. Sometimes lenders can make mistakes and accidentally mark a payment as missed or late, even if it was on time.  You have the right to ask them to put it right.

    If you discover information on your credit report that shouldn’t be there, you can request to have it removed in a process known as a dispute resolution. All you need to do is to contact CTOS at 03-27228833 or via email consumersupport@ctos.com.my. CRAs have a redress mechanism in place to ensure any disputes are resolved within 21 days.

    11.  How do I improve my credit score?

    Having a poor credit score isn’t the end of the world. You can always practice and look for practical ways to improve the credit score and avoid home loan rejection. Here are some of it:

    • Start paying your bills on time. If you are the forgetful type, sign-up for auto-debit services and pay at least the minimum amount.
    • Keep your balances low and avoid maxing out your credit limit. Be mindful when you swipe your credit cards and do not apply for new credits unnecessarily. Only spend within your limit. Always keep in mind that the debt balances on your credit cards may affect your score even if you make payments on time.
    • There is no quick or instant method to fix a credit score. You need to manage it responsibly over time and be consistent.
    • It also depends on the situations, for example:
      • If your score is low simply because you have never had a credit card before, your score will go up each month as you make credit card charges and pay your monthly bills on time.
      • Paying down balances also improves your debt-to-credit ratio and raises your score.
      • Adding an instalment loan, which is a loan that requires a regular monthly payment — such as an auto loan — changes your credit mix and can raise your score.
      • It can take years to rebuild your credit score if you’ve regularly missed payments, declared bankruptcy, defaulted on a loan or had a loan turned over to a collection agency. However, even in this situation, you can start raising your score if you can get credit and make timely payment.

    12. If my home loan approval is rejected by a bank, will others do the same?

    Each bank or lender has their risk appetite, business policies, and strategies. Therefore, an application rejected by one may be accepted by another. However, undischarged bankrupts and wound-up companies will unlikely get loan approval regardless of which financial institutions they approach.

    Other than checking your credit score, you can also check you Debt to Service Ratio (DSR) to avoid being rejected by a bank or financial institutions. This is crucial as not getting bank loan approval from one bank can set you back 3 to 6 months in applying for another. You can use  LoanCare, a home loan eligibility tool by iProperty.com.my to increase your chances of getting a home loan approval. 

    ALSO READ: What can you do after your home loan gets rejected?

    Edited by Rebecca Hani Romeli